Boeing, in its quarterly report on Wednesday, stood by its sales, earnings and cash forecasts for the full year, reassuring investors that it expects to deliver all of the jets it had planned, including Dreamliners.

Cost-cutting and higher profit margins more than offset a small decline in sales. Boeing delivered the same number of commercial jets as in the year-earlier quarter, but with deliveries of low-margin 787 halted, margins improved.

Regulators grounded the plane after batteries overheated on two 787s in January, which stopped deliveries. The company did not release a cost estimate for the Dreamliner problems, as some analysts had expected. But on a conference call, it said the majority of the cost of fixing the battery issue had been reflected in the first-quarter results.

The cost of analyzing the problem, redesigning the battery system, testing it and retrofitting the 50 Dreamliners in service was absorbed in large part by shifting resources around the company, CFO Greg Smith said.

On an accounting basis, the expense will be folded into the cost of producing more than 1,100 Dreamliners, so it will not be felt in the company's earnings, he added. He declined to provide a figure for that total cost.

Jason Gursky, an analyst at Citigroup in San Francisco, estimated that a cost of $200 million spread over 1,100 aircraft would add just over $200,000 to the cost of the jet, which has a list price of about $207 million and sells for about half that.

"It's a rounding error of a rounding error of a rounding error," Gursky said.

The Dreamliner's battery problems appear to be nearing an end after the Federal Aviation Administration approved Boeing's fix for the battery system last week, and Dreamliner deliveries are set to resume shortly. Boeing and airlines are already prepping the planes for a return to passenger service.

Boeing CEO Jim McNerney said Boeing expects to begin delivering 787s again in early May, now that the battery redesign has FAA approval, and will finish modifying all 50 customer jets by mid-May. There are 25 Dreamliners awaiting delivery currently, he said.

"As mods go ... this is not a big one," McNerney said, referring to battery modifications.

PROFIT RISES

First-quarter net income rose to $1.1 billion, or $1.44 a share, from $923 million, or $1.22 a share, a year earlier.

Core earnings, which exclude some pension charges, were $1.73 a share. On that basis, analysts had expected $1.49, according to Thomson Reuters I/B/E/S.

Investors have largely overlooked the Dreamliner problem, analysts said, because it has been amply flagged and factored into the stock price. Boeing's shares have risen 18.6 percent since regulators grounded the Dreamliner on January 16.

Boeing's shares rose some 3.4 percent, or $3.06, to $91.19 in mid-day New York Stock Exchange trading.

Analysts focused on the ability of Boeing's commercial airplane unit to rake in cash by delivering jets - cash that can be used to buy back shares, pay dividends or invest in new airplane programs, all of which are considered positive for the stock price.

Boeing's cash balance fell $2 billion in the latest quarter, less than some analysts had expected. And Boeing's confidence about its ability to make up the Dreamliner deliveries in the rest of the year allayed fears about further cash depletion. Boeing reaffirmed on Wednesday that it will produce more than $6.5 billion in operating cash flow for the full year.

STOCK BUYBACK TO BEGIN

The company said it will start buying back stock in the second quarter under a previously announced plan to spend $1.5 billion to $2 billion on such purchases. Gursky noted that the company missed a chance to get a bargain by buying its shares at less than $80 in the first quarter.

"The market was likely apprehensive as to what the (Dreamliner) cost might be, but this quarter's performance and confirmed guidance put those concerns to rest," said Carter Leake, a senior equity analyst for aerospace and defence at BB&T Capital Markets.

Sales at Boeing's defence, space and security business fell 1 percent to $8.1 billion, reflecting pull-backs in government defence spending, but profit in the unit rose 12 percent to $832 million, and margin rose to 10.3 percent from 9 percent.

Boeing's commercial airplane unit delivered 137 jets, the same as the year-earlier quarter, and booked $10.69 billion in revenue, 2.2 percent less than last time. Operating margins in the unit vaulted to 11.4 percent from 9.9 percent, reflecting the elimination of low-profit Dreamliner jets from the tally.

As a new jet, the Dreamliner is still relatively costly to build and initial customers are typically given big discounts to entice them to sign up, dragging down the plane's profit margins in its early years of production.

(Reporting by Alwyn Scott; Editing by John Wallace and Maureen Bavdek)